METALS-Nickel surges on Philippine ban proposal, options expiry

* Tin falls to lowest level since January
(Updates with closing prices)

By Maytaal Angel and Eric Onstad

LONDON, Sept 3 Nickel prices jumped to a
four-week high on Wednesday on news that a Philippine senator
had urged a ban on unprocessed mineral ore exports and also
following an options expiry in London.

Copper fell on higher exchange stocks and as investors
downplayed signs of progress towards peace in eastern Ukraine
while tin slid to a eight-month low on worries about oversupply.

Three month nickel on the London Metal Exchange
raced 2.8 percent higher to close at $19,075 a tonne, the
highest since Aug. 7.

Prices, which are up by around one-third in the year to
date, were bolstered by news that a Philippine senator had filed
a bill urging a halt to exports of unprocessed mineral ores.

The proposed halt is similar to a ban introduced by
Indonesia from January that led to a sharp spike in nickel
prices and cut other ore exports.

Most analysts expect a deficit in nickel next year, and so
the Philippines news worried investors, but some analysts were
wary of the gains since.

"This is one senator introducing what we would call a
private members bill. It's far too early to say whether it will
gain traction," BNP Paribas analyst Stephen Briggs said.

Analyst Edward Meir at broker INTL FCStone was also
sceptical. "Instituting a ban will result in foregoing massive
amounts of revenue, not to mention the fact that buyers may very
well have found other suppliers in the interim," he said in a
note. "We would therefore not be jumping on this particular
rally in nickel."

Many investors have been exposed to nickel through the
options market, and the expiry of September options was also a
factor in the surge in prices, analyst Leon Westgate at Standard
Bank said.

"With options declaration rolling off, some of the recent
gravitational pull of the $18,500 level has vanished," he said
in a note.

Open interest in September call options was concentrated at
the $18,500 strike. <0#MNIU4+>

OTHER METALS SLIDE

In other metals, copper slid 1 percent to finish
at$6,904 a tonne, its lowest level in two weeks. Prices have
struggled to gain headway in recent weeks as expectations of
fresh supply have dampened investor interest.

Daily LME data showed stocks rose by 7,000 tonnes to 154,825
tonnes, their highest since July 22 after two weeks of near
straight increases. MCU-STOCKS

"Copper took a hit when LME stocks (data) came out. If the
surplus is going to become more visible through exchange stocks,
that would be meaningful. It's too early to say," Briggs said.

Markets were wary of news about the Ukraine conflict.

Russian President Vladimir Putin said a deal to end fighting
in eastern Ukraine could be reached this week, but hopes of
peace were clouded by Western concerns that the announcement was
timed by the Kremlin to wrong-foot NATO on the eve of a summit.

"This news about Russia and Ukraine, the immediate impact
you're more likely to see through oil and precious metals for
one, and secondly, it's not clear what it means," Briggs said.

Some investors hoped for further policy action at the
European Central Bank meeting on Thursday after data showed euro
zone retail sales slowed in July, while business activity grew
at the slowest rate this year in August.

Looser policy in Europe would cheapen liquidity for industry
and investors, who may raise their holdings of hard assets,
which tend to hold their value when paper currency depreciates.

Aluminium shed 1.3 percent to end at $2,079 a tonne,
moving away from last week's high above $2,100, which was the
most expensive since February 2013.

A partial closure of capacity at an aluminium smelter in
China helped drive up domestic prices of the metal by as much as
4 percent this week as investors scramble to compensate for an
expected shortfall in supply.

Caroline Bain, senior commodities economist at consultancy
Capital Economics, said its forecasts for aluminium had recently
been revised.

"We are anticipating a small deficit of just over 100,000
tonnes this year, but we have the market back in surplus next
year as we expect China's production to keep growing," she told
the Reuters Global Base Metals Forum.

Zinc closed 0.5 percent weaker at $2,365 a tonne,
having struck a four-week top of $2,391.25 in the prior session,
while lead shed 1.4 percent to $2,208.

Tin fell 0.8 percent to end at $21,350, the lowest
level since January, as analysts and investors scratched out
their previous forecasts of a deficit this year due to more
supplies than expected and soft demand.

PRICES

Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Three month LME tin
(Additional reporting by Melanie Burton, editing by David Evans
and Jane Baird)

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